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DLF No Bottom Yet – SELL

November 12, 2008

In a report released by Reliance Equities, the company has recommended a SELL on the stock of India’s largest Realtor DLF which has stalled work on its Gurgaon’s Mall of India [Largest Mall]

The main trigers for the recommendation are – Volumes will disappoint in the immediate period. Rising receivables during the better part of the cycle (again to result in lower volumes). Commercial property sale to slow post DLF Assets (DAL) transaction.

DLF has planned average delivery of 50m sq. ft. annually through FY09-FY18E. It has booked sales of 36.6m sq. ft. in FY08-1H FY09, while delivery stood at 14.2m sq. ft. The difference between delivery and sales is due to the Percentage Completion of Contract Method. Delivering 50m sq. ft. annually (even with its focus on the mid-income housing segment) will be difficult, in our view.

DLF had total sales of Rs 221 billion in FY08–1H FY09. Receivables currently stand at Rs 97 billion. Thus, effectively 44% of sales during this the period are yet to be received.

DLF has an NAV of Rs 220/share and Reliance Equities has set a target price of Rs 176 on the stock.

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